Thursday, February 28, 2008

Granite Hacarmel Investments Ltd. has signed an memorandum of understanding (MOU) to participate in the setting up of a company that will invest in renewable energy projects in India. Granite Hacarmel will provide $6 million of the venture's initial investment of at least $20 million.

Granite Hacarmel CEO Ami Sagis told "Globes", "We decided to build on the company's strengths in areas complementary to our regular business, including energy and especially renewable energy. We've accumulated extensive experience in the water and energy industries in Israel."

Sagis added, "In India, there is a severe shortfall between energy needs and energy supply, which creates a great opportunity to enter this market, while utilizing Granite Harcarmel's capabilities."

Granite Hacarmel's cleantech business is carried out through subsidiary GES Global Environmental Solutions Ltd., which focuses on water technologies. GES is a partner in the Palmachim seawater desalination facility. Last week, it was reported that GES planned to increase its holding in UniqKleen Technologies Ltd., a start-up developing technologies for treating industrial effluent with magnets.

According to Sagis, "We'll invest in all renewable energy sectors, from cogeneration, wind farms, and pumped storage hydroelectric power. We think that expanding our holding in this field is the right thing to do worldwide, and in India in particular."

According to its web site, the Arava Power Company (APC) will produce renewable energy and sell it to residents of the Arava and the Israel Electric Company. "The creation of Arava Power is part of a regional initiative to make the Arava the Silicon Valley of renewable energy." The company is negotiating for a regional exclusive on a new photovoltaic solar panel technology and is also setting up an independent affiliate across the border in Jordan.

Ed Hofland is Arava Power's Chairman, and Yossi Abramowitz is its President. Abramowitz blogs at Peoplehood.org, and, in September 2007, he gave a sermon on why developing solar power is part of the mission of the Jewish people. His words are inspiring, and I highly recommend reading the post.

For a sense of what Abramowitz has to say, and the goals that the Arava Power Company has set for itself, here is a passage from his sermon:

"The building of solar fields in the footsteps of Moses and the Israelites is certainly a worthwhile task (and may explain the glow on his face). Yet it can be much more. Can Israel become the first western economy to make the switch from carbon-based to solar based? Can the Jewish people become carbon neutral by 2020..."

With the launch of Aqua Lab, which will operate in a format similar to that of a technology incubator, AquAgro Fund will now also be involved in making seed and early-stage investments.

"We decided to set it up together with two overseas funds, and it will be managed by Oded Sagee [Chief Scientist of Gaon Agro Industries]," says Nir Belzer. "The important thing here is that Aqua Lab is not a fund, and so there are no limitations on the time one can spend raising money for it. Venture capital funds, by contrast, have a deadline set out in the prospectus, by which time you have to have secured the maximum commitment out of the designated target sum. We will decide whether to float or merge Aqua Lab depending on how profitable and successful it is. In other words, its unique structure gives us flexibility in various matters," Belzer adds. Milo will be company chairman.

According to Belzer, each company under the Aqua Lab umbrella will receive between $250,000 and $750,000 in investment, with an option of follow-on investment under the auspices of the AquAgro Fund. Belzer and Milo prefer not to disclose the names of the funds that have joined the investment so far but say that one is from the US and the other European, with all three entities owning the company in equal shares.

"We want Aqua Lab to have an international character with the partners sharing responsibility," explains Milo. At the same time as the tying up of the procedural ends entailed in the formation of the company, which has already been registered, Aqua Lab is seriously considering investments in two companies, and hopes to finalize these by the end of the current quarter. Also under consideration are early stage investments in four more companies.

Investment in agriculture and food

Globes: How will the fund operate?

Milo: "It will last for 8-10 years. We will not invest more than 10% of the fund in one company and we intend to reach 12-13 investments in all, provided that we manage to raise $100 million. The idea is to create an adequate spread of the risks on the one hand, while maintaining a critical mass in each company on the other."

Belzer and Milo have known each other for 10 years, and both have gained knowledge and investment experience in other funds. They teamed up with Benny Gaon, Chairman of Gaon Agro Industries, who wanted to set up a cleantech fund, and gave it shape and focus. He brought the money. The fund focuses principally on water, alternative energy, smart agriculture and food, "and we don't go in for trends," says Belzer. "We will stick to things that really are essential. Such as, for instance, cost reduction, which is a critical factor when selecting a technology - reducing the price of a cubic meter of desalinated water, a kilowatt hour of solar energy, and the consumption of water per hectare for a specific crop," Milo explains.

The fund employs a utility model when investing in technologies designed to cut costs. This means that if the company has significantly reduced its price per unit, the fund shares in the profits and not just the technology. "This is the sole incentive to buy technologies like these. Ultimately, it's a commodity, so costs are a critical element," says Belzer.

What differentiates your fund from others?

Milo: "We have several unique characteristics, one of which is the fact that we will also invest in agriculture and food, fields which other cleantech funds (worldwide as well) avoid. Because of the changes in regulation and requirements in the food industry, there are now a lot of investment opportunities for venture capital in these two fields."

Belzer: "There is now rivalry between products that serve as food ingredients and fuel applications. Smart agriculture focuses on the growing of inedible crops, on residual land and in saline water. One option is the growing of seaweed. There is no shortage of saline water in the Negev, the Jordan Valley and the Arava region. Israel will be an excellent trial site for this, and the big money will be in the growing of raw materials for producing biomass fuel. We're well ahead of the rest of the world in smart agriculture and water and we are poised to build a strong strategic presence in them."

According to Gao Erkun, "The per capita water resources in Israel is less than 370 cubic meters. A bottle of water is worth four bottles of milk there. The country implements a strict system to use water: all the water resources are monitored and dispensed by the government. With seawater desalination and water pollution treatment, it could meet the society's 700 cubic meters per capita water demand."

China contains roughly 20 percent of the world's population but only 7 percent of global water resources. The per capita water volume is one fourth of the world average. The country also has a severe regional water imbalance, with about four-fifths of the water supply in the south.

Xinhua News says that China is fully aware of the problems and is seeking ways to improve the situation. In its 11th Five-Year Plan (2006 - 2010), the country plans to reduce per unit of GDP water cost by 30 percent and increase its agricultural water efficiency coefficient to 0.5.

Last November it was reported that Israel expects "to significantly increase" its water technology exports to China over the next few years following a successful round of meetings between National Infrastructures Minister Binyamin Ben-Eliezer and Chinese water-technology leaders attending WATEC Israel 2007. It was alsoreported that Israeli company Blue I Technologies will supply real-time water quality control systems for the 2008 Beijing Olympic Games.Xinhua News is the official press agency of the Chinese government.

Tuesday, February 19, 2008

"Globes" reports that water treatment technology company GES - Global Environmental Solutions Ltd., a subsidiary of Granite Hacarmel Investments, is set to increase its holding in UniqKleen Technologies Ltd., a start-up developing technologies for treating industrial effluent with magnets. GES will raise its stake in UniqKleen to more than 60% from 51%, at a value of several million dollars. GES VP of Marketing, Water & Wastewater and UniqKleen CEO Anat Halgoa confirmed the report but declined to comment on the size of GES's additional investment or the value at which it will be made.

UniqKleen was founded in 2002 within the framework of the Yozmot HaEmek incubator by a team of new immigrant scientists from Russia - Dr Edward Brook-Levinson, Dr. David Gurevich, and Dr. Yevgenia Dobrokhotov. They have remained shareholders in UniqKleen but GES has taken over the management of the company, which graduated from the incubator in 2006 and is located at GES's site in Akko.

GES is UniqKleen's largest investor, and it first acquired 30% of the company in January 2006 for a few hundred thousand dollars.

"Solar energy is the ultimate answer to the global quest for renewable energy," said Gonen Fink, CEO and co-founder of Pythagoras Solar. "We are very pleased to be supported by the leading venture capital funds in Israel and with the strong traction our technology has received from the industry. We look forward to building a world-class team of scientists and engineers who are prepared to tackle the multidisciplinary challenges that the photovoltaic industry is facing as it grows into a substantial factor in the world energy market."

Pythagoras Solar was founded in 2006 by Fink, previously at Check Point Software, Dr. Itay Baruchi, a winner of the the Scientific American magazine's "50 most significant scientific breakthroughs" award, and Precede Technologies. The company, which expects to disclose more details about its technologies and products by early 2009, has an R&D center in Hakfar Hayarok, Israel and a U.S. office in San Mateo, California.

A SkyPower delegation recently visited Israel and held preliminary talks about cooperation with some of the Israeli companies planning to bid in the tender. SkyPower also asked for full information about the project from the Ministry of Finance, the Ministry of National Infrastructures, and the Ministry of Environmental Protection.

SkyPower is one of Canada's largest renewable energy companies. It specializes in the development, construction, and management of wind farms and solar energy power stations. The company is currently involved in 70 renewable energy projects in various stages of development, with aggregate capacity of 7,000 megawatts (MW). Most of the projects are in Canada and the US.

The two companies say they plan to explore projects in desalination, water resource management, water supply, municipal water management and/or wastewater treatment and reclamation projects.

Growing urban populations in India have made existing capacities of water treatment, waste water treatment and recycling inadequate. The country has introduced more stringent pollution control, which is rendering many existing technologies obsolete.

Mekorot is a leader in water resources management, desalination, wastewater treatment and effluent reuse, rain enhancement, water quality, water security and water project engineering.

It supplies 80 percent of Israel's drinking water and 70 percent of its entire water supply, operating 3,000 installations across the country.

Monday, February 11, 2008

Arison Water Initiative today completed the acquisition of 96% of Dorot Water Technologies Ltd. for NIS 106 million, reflecting a company value of NIS 130 million, and disclosed details of the takeover, ending months of leaks to media. Kibbutz Dorot will continue to own 4% of the water valves and meters, filters, and irrigation equipment manufacturer, and its CEO, Avi Harpaz, will keep his job.

Arison Water Initiative disclosed that its business plan was approved in June 2007 and that it has been making investments in Israel and other countries since then. Former Mekorot National Water Company CEO Baruch "Booky" Oren is the CEO of the $100 million venture.

Arison Water Initiative said that Dorot Water Technologies, which was founded over 60 years ago, has been growing by 20% a year since 2002 as it established its range of valves and meters for agriculture and municipal water systems. 80% of the company's output is exported. The company has 220 employees.

Last month, Arison Water Initiative made its second investment: a $250,000 venture capital investment in StreamControl Ltd., which develops a comprehensive solution for leakage reduction by pressure management

Sources inform ''Globes'' that Shaked Global Group, the private equity firm of the Shaked family - the controlling shareholders of online gambling company 888 Holdings plc - has acquired the 20% stake of Kibbutz Ramat Rachel in Blue I Technologies Ltd. This is the first investment in cleantech by Shaked Global Group, founded by Ohad Shaked. Blue I CEO Tsur Ben-David and Shaked Global Group CEO Shai Onn were not available for comment.

Kfar Saba-based Blue I develops real-time water quality control systems.

The sources added that Shaked Global Group will also participate in a $6 million funding round that Blue I is now holding from current shareholders. The company expects to close this round by the end of March at a company value of $16-20 million before money. The proceeds will be used to finance the company's newly launched platforms, including a comprehensive municipal network water quality control system. Blue I is reportedly about to install the first system in Barcelona.

After the financing round, Blue I plans to enter into a strategic partnership with large international water quality control systems makers. The company already supplies its systems to General Electric Company and Veolia Environnement SA.

Blue I has raised $7 million to date, including $2.7 million in its previous round in 2006, which was one of Israel's most significant cleantech investments that year. In addition to Shaked Global Group, Ben-David and Tene Investments each own 20% of Blue I, Blue Drink (European and Israeli angels led by Blue I chairman Ronen Melnick) owns 18%, and Docor International Management Ltd. and TN Ventures (a private fund owned by Tamar Naor) jointly own 15%. Company employees, including four in China and two in the US, own the rest.

In November 2007 it was reported that Blue I will supply real-time water quality control systems for the 2008 Beijing Olympic Games.

Market sources estimate Blue I's 2007 revenue at several million dollars. Under a strategic plan prepared by Ernst & Young, the company plans to grow by 80% this year and by more than 100% in 2009. Ernst & Young declined to respond to "Globes"' questions.

"Globes" reports that Housing and Construction Holding Co. Ltd. (Shikun u'Binui) subsidiary Blue-Green Development and Investment Ltd. will build and operate a five million cubic meter brackish water desalination plant for Kibbutz Kfar Masaryk in the Galilee. Blue Green has an option to expand the plant's output by an additional three million cubic meters of water. Construction will cost NIS 40 million.

The facility will desalinate brackish water from the sources of the Neeman and Kurdani Rivers using reverse osmosis technology. The water will be pumped from drills on kibbutz land.

Blue Green is the cleantech arm of Housing and Construction, which is controlled by Shari Arison through Arison Holdings Ltd. The company operates a wide range of infrastructure projects, including water and sewage management, municipal water management, and renewable energy. The company is Israel's largest private sewage treatment company for municipalities. Amir Levi is its CEO.

I am an associate in the Business Law Department of Goodwin Procter LLP, a leading U.S. law firm. The views expressed on this website are my own, and not necessarily the views of Goodwin Procter. You can contact me at jonathan@boston-israel.org